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2018 MIDTERM ELECTION

From the Dept. of "No Sh*t, Sherlock."

Wed, 03/30/2016 - 1:48pm

So, the Big Story today is a new report from the Blue Cross Blue Shield Association revealing that (wait for it)...people who signed up for private health insurance via the new Obamacare exchanges over the past two years are a lot sicker and more expensive to treat than those previously enrolled in the individual healthcare market. From their opening summary of findings:

Comparing the health status and use of medical services among those who enrolled in individual coverage before and after the ACA took effect, as well as those with employer-based health insurance, the study finds that:

Members who newly enrolled in BCBS individual health plans in 2014 and 2015 have higher rates of certain diseases such as hypertension, diabetes, depression, coronary artery disease, human immunodeficiency virus (HIV) and Hepatitis C than individuals who already had BCBS individual coverage.

Consumers who newly enrolled in BCBS individual health plans in 2014 and 2015 received significantly more medical services in their first year of coverage, on average, than those with BCBS individual plans prior to 2014 who maintained BCBS individual health coverage into 2015, as well as those with BCBS employer-based group health coverage.

The new enrollees used more medical services across all sites of care—including inpatient hospital admissions, outpatient visits, medical professional services, prescriptions filled and emergency room visits.

Medical costs associated with caring for the new individual market enrollees were, on average, 19 percent higher than employer-based group members in 2014 and 22 percent higher in 2015. For example, the average monthly medical spending was $559 for individual enrollees versus $457 for employer-based group members in 2015.

There's a bunch of charts and graphs and such in the BCBS report showing the areas and metrics where ACA exchange enrollees are sicker, more disease-prone, more likely to make medical appointments and more expensive to treat than the pre-ACA individual market enrollees and/or Group market enrollees...but really, why is this coming as a surprise to anyone?

As anyone with two licks of sense already knew well before the ACA's rules on "no more denials for having pre-existing conditions" and "no kicking people off over minor technicalities (ie, rescission)" went into effect, prior to the ACA, insurance carriers were allowed to cherry-pick their enrollees, kicking sicker people (or anyone even suspected of being sicker) to the curb.

Under the ACA, they can no longer do so; in fact, aside from asking your age, gender and whether you're a smoker, insurance carriers aren't even allowed to ask most medical history/situation questions (ie, they can't ask your weight, whether you have a history of heart disease and so forth). Even if they did ask, they can't deny you coverage based on those factors anymore anyway, and can't charge you more based on gender.

Really, I believe that age, county of residence and smoker status are about the only personal questions which they can modify their prices based upon.

In any event, this means that for decades, millions of sicker than average people were either paying through-the-nose full prices for treatment of their ailments...or were suffering (and dying) silently, not allowed to play reindeer games with the other patients.

Then, in 2014 and 2015, a good 6 million or so of these folks signed up for coverage via the ACA exchanges (along with another 5 million or so who were replacing existing coverage of some sort). Many of those 6+ million had been desperately waiting for years or even decades to be able to get coverage to treat their cancer, diabetes, heart disease, gangrene, "gammy legs", halitosis and whatever other long-lingering ailments they happened to be dealing with which the insurance carriers used as a reason to deny them coverage.

Needless to say, this massive backlog of pent-up demand for healthcare services exploded onto the market all at once, and it's taken at least two years for the worst of it to pass. Has this spike in healthcare treatment needs plateaued or subsided this year? I've no idea; it'll be a few more years before we know for sure.

The findings are important because they could help explain the financial instability that many insurers have experienced on the exchanges. Insurers had expected to get Obamacare clients like those on group plans offered by employers. But they were wrong. The Obamacare enrollees are costing them more money.

“What we thought and we had envisioned is the cost of the newly enrolled would end up approaching that of the [employer-insured] group market, but we’re seeing in the data we have today it is actually about 20 percent higher than in the group market,” said Alissa Fox, senior vice president for policy and representation at BCBSA, in an interview with Morning Consult. “I think that’s really something that surprised us.”

Finding 3: The non-group cost per member per month will increase 32 percent under ACA, compared to pre-ACA projections

In the last section of Figure S-1, the average non-group allowed per member per month cost, excluding those in high risk pools (state-run pools that existed pre-ACA and federally funded state pools under ACA), is shown in absence of the ACA; these costs reflect the “underwritten” risk in most states.3 The percentage increase between pre- and post-ACA estimates is shown as well. The post-ACA figures include the impact of a) high risk pool members, b) employers dropping group coverage, and c) increased morbidity from selection by those currently uninsured who now purchase coverage. The results of this analysis indicate that there will be significant variation across states in the impact of the ACA on average cost in the non-group market. These estimates come from Figure 5 of the state-specific tables. Since the populations before and after ACA may be significantly different, Figure 6A shows the increase by age bracket. States that show a decrease in average costs under the ACA are primarily those that currently use community rating in the non-group market. The reduction in average costs for these states reflects the younger and healthier individuals that will enroll due to the reduced cost from the premium subsidies

Our analysis also indicates that while high risk pools generally have few enrollees, the cost per individual is very high. Movement of the high risk pool individuals into the non-group Exchange will generally create a significant increase in cost. However, it can be reasonably argued that proportionately more uninsured individuals will have similar risks in states that had relatively small high risk pools. The reader is encouraged to further examine this issue.

...and so on and so forth. Yes, the SOA report is comparing the ACA individual market with the non-ACA individual market, while the BCBS report compares it with the group market, so it's not a strict apples-to-apples comparison, but the bottom line is that there were tons of warnings and reports (not to mention common sense) indicating that yes, ACA exchange enrollees would probably be a lot more expensive to treat...which is the very reason they had been shunned from the market all those years in the first place.

As Owens continues:

“Surprise” is generally not a good word when it comes to insurance markets. Predictability is key for insurers, who were flying blind when they first went on the exchanges. They had to set 2014 and 2015 premiums without actually knowing what the new marketplaces would look like. They were able to use Obamacare claims data, information about how much health care enrollees used, to inform rates for the first time when setting rates for 2016.

The administration isn’t sympathetic. The Department of Health and Human Services said these findings should not surprise insurers on the exchanges, noting that those same groups previously denied people coverage based on their health status.

“After years of being discriminated against, Americans with preexisting conditions are no longer locked out of coverage because of a health condition like asthma or diabetes,” said Ben Wakana, an HHS spokesman. “It’s no surprise that people who newly gained access to coverage under the Affordable Care Act needed health care. That’s why they were locked out of coverage before.”

So really, the only news here is specifically how much more expensive it is to treat ACA exchange enrollees.

...if the Obamacare enrollees are about average, what does this say about the pre-Obamacare enrollees? That's pretty obvious: they were considerably healthier than average. Why? Because insurance companies routinely refused to offer individual coverage to anyone who showed even a glimmer of poor health. Obamacare put an end to that, and that's good news.

Of course, I'm being a bit unfair to the carriers; most of them did anticipate costs to go up the first few years; they just generally underestimated how much they'd go up. With their "No Soup For You!" policies yanked away after decades of relying on having them, they were left throwing darts while blindfolded, and had to guess somewhat randomly at how to price their policies going forward. Most of them did a pretty poor job of guessing, which is why...

...The 2010 law also built in programs to help mitigate risk in the new marketplaces. The programs, specifically risk adjustment, are designed to shift funds from plans with sicker enrollees to those with healthier ones.

Another temporary program, risk corridors, shifted money based on claims expectations the first three years of the program. That program was designed to help insurers who set premiums too low, or had higher than expected claims, recover their losses. However, Congress flat-funded the risk corridor program the past two years, resulting in the high-cost plans only getting about 13 percent of the requested funding for 2014.

The "good" news here is that the RC program was set to expire at the end of this year anyway, so it'll be a moot point starting in 2017...but that doesn't change the fact that cutting it off at the knees was bad news for a lot of carriers, contributing to the collapse of at least a dozen of them (mostly the ACA Co-Ops, but also at least one private carrier in Wyoming).

In any event, hopefully things will level off this year, especially now that the carriers will have 2 full years worth of post-ACA data to work with in setting rates for 2017.